In a close vote, the Bundestag has approved Chancellor Schröder's plans for labor market reform and tax cuts. His own Social Democrats ended up falling in behind their leader, even though six had threatened to revolt.
 
It was something of a reprieve for Gerhard Schröder, who had staked his political future on the outcome of Friday's vote over his plans to overhaul Germany's welfare state. Although controversial, in the end, the plans squeaked by with slim majorities.
 
306 deputies voted for and 291 voted against the so-called Hartz IV Law which cuts some job benefits and incurs penalties to long-termed unemployed who do not accept jobs offered to them. The Hartz III Law, which restructures Germany's labor agency, passed 304 to 294.
 
Although it was tense in the lead-up, the vote fell largely as expected. Gerhard Schröder was successful in quelling a rebellion within his own ranks after six left-leaning members of his SPD party threatened to vote against the plans. Schröder had threatened to resign if that happened, but a last-minute softening of some of the measures was enough to convince the rebellious deputies to fall back into line. One member of the Green Party, Werner Schulz, abstained.
 
Schröder had cut short an EU summit in Brussels on Friday to get back for the vote and ensure he got his majority. The opposition, made up of the Christian Democrats, the Christian Social Union, the Free Democrats and the Party of Democratic Socialism, had long announced its opposition to the measures.
 
Goal: kick-starting the economy
 
The reforms are a key part of Schröder's "Agenda 2010" package of reforms which is designed to pull Germany out of three years of economic stagnation. While the country is showing some signs of economic recovery and emerging from its second recession in as many years, experts still expect the economy to be flat this year. Schröder hopes that loosening some of Germany's rigid labor market rules and bringing tax cuts forward a year to boost consumption will provide a badly needed kick-start and help the country shake off its reputation as the "sick man" of Europe.
 
Key elements of the plan include restructuring the Federal Labor Agency, cutting benefits for unemployed people and penalizing those who refuse to take jobs offered to them by government-administered employment agencies. Duties on tobacco will be increased, adding about 33 percent to a package of cigarettes, and €15.6 billion ($18 billion) in tax cuts will be brought forward to 2004.
Hours before members of the Bundestag had to make up their minds, Federal Labor Minister Wolfgang Clement appealed for their support. Clement defended the reform package, the controversial measures were "central features of our fight against this country's oppressive unemployment situation."
Unemployment in Germany threatens to hit a postwar high this winter and government officials say the reforms could cut the number of unemployed by 10 to 15 percent. "We need a new approach to the labor market," Clement told parliament. "We have to free up investment and consumption. That's why we have to make sure that taxes and labor costs are reduced."
While the reform plans would bring unpleasant cuts to Germans used to their generous welfare state, most have come to the painful conclusion that things cannot go on as they are. Unsurprisingly, tax cuts are popular, but many say even a planned overhaul of the overburdened health system is unavoidable. A recent survey by the polling firm Forsa showed that almost half of Germans said the country needed to take more action to haul itself out of stagnation.
 
Not their final form
 
Although the reform plan passed a crucial hurdle today, it still has to make it through the opposition-controlled upper house, the Bundesrat, before being made into law. Opposition parties have said the reforms do not go far enough and have promised to beef them up when the reform plans go before lawmakers there. That means several more months of uncertainty and hard lobbying for Schröder and his allies.
 
"It will require a big effort for a long time until just before Christmas. That's when the last votes will be," SPD parliamentary floor leader Franz Müntefering told WDR

European Foreign Ministers meeting in Luxembourg Monday debate the amount the EU should contribute to Iraq reconstruction and French foreign minister says new Iraq resolution shows “progress.”
The European Union is expected to pledge €200 million ($234 million) between now and the end of 2004 at next week’s Iraq donor conference in Madrid. But at a meeting of European foreign ministers in Luxembourg on Monday, Europe’s top diplomats debated whether that sum would be enough.
With a view to Germany’s current budget problems and pressure from Brussels to adhere to the strict deficit rules laid out in the Maastricht Treat’s Stability and Growth Pact, few expect that figure to increase.
"You all know our financial condition and the pressure that the European Union is putting on France and Germany," Fischer told the foreign ministers. "In that respect we need to remain realistic."
Criticism from London
But the EU's donor austerity angered some, including British Foreign Minister Jack Straw, whose country has been Washington’s closest ally during the Iraq war. Straw said he considered the EU’s contribution to the Iraq reconstruction effort to be too small. Britain has said it will contribute €780 million to Iraqi security and reconstruction efforts during the next three years.
"We are going to make a substantial contribution, and we want others to make a substantial contribution," a British official told the news agency Reuters.
American politicians have also criticized the EU’s planned contribution – especially in light of the €56 billion in reconstruction costs the World Bank recently estimated for Iraq.
But in a statement, the ministers in Luxembourg offered their backing for the European Commission’s aid pledge.
New Iraq resolution
Fischer, who on Sunday spoke by telephone with his American counterpart, Colin Powell, said he received no such criticism from the Secretary of State. During the conversation, Powell discussed the details of the latest version of the Iraq Resolution that the U.S., Britain and Spain plan to introduce in the Security Council.
Though officials released few details Monday evening about the new resolution, French Foreign Minister Jacques de Villepin greeted the text as "progress" in the dispute between the U.S. and France, before saying Paris would have to study it further.
Germany’s Fischer, meanwhile, said his country was "going to work with the new U.S. draft," but that it was still "too soon for us to make any judgement."
France, Germany and Russia together have blocked previous U.S. attempts to pass the Iraq resolution because they said they did not go far enough in establishing a broader U.N. mandate or setting up sovereign rule in Iraq.
Among the German and French demands is a concrete timetable that would put Iraq’s governance back in the hands of Iraqis in the shortest reasonable timeframe. In addition, the EU has called for the appointment of an independent trustee, and not the U.S., to manage the international aid fund.
‘Alarm’ over Middle East crisis
Meanwhile, the foreign ministers also expressed growing concern about escalating violence between the Israelis and Palestinians.
"The situation is very alarming," Fischer said. "The terror must stop. On the once side we have huge concerns about the construction of the wall and the additional territorial loss that it represents. The facts that are being created on the ground stand in contradiction to the ‘Road Map’. At the same time, the instability on the Palestinian side is something that many of my colleagues here are also concerned about."
He said the EU would seek to help with efforts to stabilize the situation.
With reporting by Deutsche Welle correspondent Berndt Riegert in Luxembourg.

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